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April 17, 2013

American predicts profits through 2017 with US Airways merger

The newly merged American Airlines and US Airways expect to generate $47.8 billion in revenues by 2017, growing passenger revenues with a larger network.

The forecast, cited in the bankruptcy reorganization plan and declaration statement filed Monday by American's parent company, AMR Corp., also estimates that the combined carrier will be profitable in 2013 and for the next five years even as labor costs are set to rise.

Although the two airlines don't expect to complete their merger until later this year, the plan expects the new company will post a $2.5 billion profit on $40.9 billion in revenues in 2013, a 5.6 percent increase in revenues. The filing also predicts that the combined airline will increase its network capacity by 1.9 percent over 2012.

The merger still needs to be approved by US Airways shareholders, the Department of Justice and American's creditors.

AMR has asked the bankruptcy court to set a confirmation hearing date of Aug. 15. Its creditors would be able to vote on the reorganization plan at that time.

Through the bankruptcy process, American has renegotiated its union contracts to lower labor costs. And while the reorganization plan assumes labor costs of $7.6 billion in 2013, they are expected to jump 25 percent by 2017 to $9.5 billion.

The carrier also informed employees that nonunion workers will receive 2.3 percent of the common stock issued as part of the proposed reorganization. About 1.4 percent of that stock will be shared by American's agents, representatives and flight planners while the rest is given to support staff and management that do not have other incentive plans, the company said in a letter to employees Monday.

In its reorganization plan, the carrier also disclosed that it will save $300 million through 2017 with the changes made to purchase agreements with Airbus and Boeing. An additional $120 million will be saved in 2018 and beyond. And depending on the number of aircraft options American exercises, the savings could increase.

And while American continued to explore other alternatives aside from a merger with US Airways last year, deals with other carriers never materialized.

"Discussions with those airlines did not progress because a transaction with any of those airlines was not desirable," the filing said. "After evaluating the potential strategic alternatives, it appeared that a business combination with US Airways was the only viable option for American to consider versus" remaining independent.

-Andrea Ahles


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Wanna bet?


So refresh my memory...why are they in bankruptcy???

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